New Delhi: LS passes Bill for legal framework to bilateral netting of QFCs. The Lok Sabha on Sunday unanimously passed a Bill that seeks to provide a legal framework for bilateral netting of Qualified Financial Contracts (QFC) which are over-the-counter derivatives contracts.LS passes Bill for legal framework to bilateral netting of QFCs.The Bilateral Netting of Qualified Financial Contracts Bill, 2020, introduced in Lok Sabha on September 14, allows for the enforcement of netting for QFCs.
Speaking on the Bill, Minister of State for Finance and Corporate Affairs Anurag Thakur said it ensures financial stability and promotes competitiveness in Indian financial markets by providing enforceability of bilateral netting of qualified financial contracts. The Central Government may, by notification, exclude contracts between certain parties or containing certain terms from being designated as QFCs.
The provisions of the Bill will apply to QFCs between two qualified financial market participants, where at least one party is an entity regulated by the specified authorities (RBI, SEBI, IRDAI, PFRDA, or the IFSCA). The Bill provides that netting of QFCs is enforceable if the contract has a netting agreement — an agreement that provides for the netting of amounts involving two or more QFCs. A netting agreement may also include a collateral arrangement.